By: Sarah Hoerner
Agricultural Lenders, Flanagan State Bank
I often start any presentation I give with the following question, “What is a farm?”. For many a farm is a place where they grow food for others or it’s their little peace in this world. Different people have different answers, but at the heart of it all, a farm is a business. Given the emotional attachment and passion so many of us have for farming, it sounds callous to refer to our farms as “just a business,” but at the end of the day if you do not think of it as a business then you could lose it. Most of us would rather be out there in the fields, fixing fences, in the greenhouse, and doing what most people think of when they think of farmers. Beth Hoffman in her book “Bet the Farm” gives a more realistic portrayal of this part of farming. She said, “farm life is actually a job full of spreadsheets, receipts, and file folders.” Keeping timely and accurate records can do a lot for any business including farms. So, what can farm records do for you?
- Marketing: Help you compute accurate breakeven costs on crops and livestock. Goal: Price products at a profit.
- Management Decisions: Helps make accurate and timely decisions easier.
- Financial Analysis: Farm Records should tell you what makes you money, and what you spend your money on.
- Review Records: Find a consultant to review and help improve efficiency, production, and profitability.
- Cash Flow & Cash Flow Management: Good farm records allow you to compare monthly actuals to projected income and expenses. Your focus should be on profitability and growth. Goal: Strive to at least break even to being profitable and to build working cash.
- Tax Planning: Farmers can use their farm records to help tax plan throughout the year. Goal: Minimize taxes and plan tax obligations to your schedule.
- Enhance your management skills: The more you know about your operation the better decisions you can make as a manager.
*7 Thing Records Do for You Provided by Richard Ritter, Flanagan State Bank
Think of working on your financial records like doing chores. You don’t just leave livestock out in the pasture and hope for the best. You check on them and adjust as needed. If they are sick, then you call the vet. If they have eaten all the grass in the pasture, then you rotate to another pasture. It’s the same with your farm operation. Don’t just put it out to pasture and not check on its well-being. Stay up to date with your records and be willing to make changes to keep your farm in business. Changes can mean scaling back if you are not profitable or it can mean taking advantage of an opportunity to expand your farming operation. How will you know if you can afford to purchase a new delivery van? How will you know if you can afford to hire more labor? These questions can only be answered by referring to your records. Farming has a lot of unknowns (weather, prices, demand, etc.) this is one area of your operation that you can be in the know. Farm records are the most important tool to have on your farm. Most farmers just use them for taxes, but they can offer you so much more than tax planning. Utilizing your records to do the 7 things listed above will help you reduce your risk and make your farming operation more profitable.